A Game Changing Innovation Reaches a Milestone

One year ago today, Steve Jobs announced the iPad.  It came into the world with incredibly high expectations, and it exceeded them by every measure. 


It is a beautiful machine -- perfectly designed, finely crafted and an indispensable tool that adapts to a user's needs with incredible dexterity, as anyone who uses an iPad will attest.  It proved to be a truly disruptive technology instantly impacting netbooks, laptops, ereaders and the entire print publishing industry.


As with any great innovation, there were detractors, but most of them have fallen silent as the iPad raced to success. And there are imitators. Allegedly, there are many -- just waiting in the wings, prepared to imitate, because they have been left with so little room to innovate or differentiate.


After a year of predictions, only a scant few opponents have made it to market.  Of those that made it out, most seem like second string quarterbacks -- they function similarly but are not quite able to perform on the same level.  HP, Dell, Samsung, Toshiba Motorola and others will find competing head to head with this machine impossible unless they miraculously find a way to change the playing field in a meaningful way.


Those who have studied Michael Porter's activity maps might understand that this machine's perfect integration creates an inherent competitive advantage and a steep, if not insurmountable, barrier to entry. No other company can match the iPad's evolution from the vision of a genius, its unique processor, its long-life battery, an optimized mobile operating system, a well-conceived and robust app store, a true understanding of user interface and manufacturing and assembly processes intended to sell the iPad at a price that offers more value than any other digital device on the market.  Those were derived from choices -- at times hard and controversial choices such as abandoning Flash video and making a wholesale commitment to HTML.


But they were choices made without compromise, and that is the essence of the iPad's brilliance -- there are no compromises in this machine.


Love or hate Apple, the concept of innovation mated to use, craft and value is what seems to be missing in business today.  The idea that a brilliant mind committed to continuous innovation, flawless design and value that is enhanced rather than cheapened by its manufacturing process seems beyond the philosophical -- if not the operational -- reach of many companies.  


So, happy birthday, iPad.  You changed the way we think of computing.  Maybe the courage and commitment that led to your design can also change the way we approach innovation.

The King is Dead, Long Live the King

Much has been written recently about the continued success of powerful technology companies such as Google, Facebook and Apple. These companies are reshaping the entire landscape of computing and telecommunications; how we talk to one another, how we gather information, how we entertain ourselves, and are leading the way toward a new way of human connection and interaction. As these companies ascend in prominence, many pundits have been simultaneously predicting the demise, and possible death, to the once all-powerful tech giant Microsoft. The PC is being replaced by tablets, smartphones and tablet/smartphone hybrids. As that happens, these pundits predict, the billion plus users of the Windows OS will stop buying from Microsoft and will begin using operating systems developed by Google, Apple, RIM, Nokia and others. This past summer, in an attempt to fight back, Microsoft decided to enter the smartphone business with Kin, which turned out to be one of the most disastrous new product introductions in the history of the technology industry. Microsoft pulled the plug on the ill-fated product less than a month after it was introduced. Again, the pundits had a field day with this news, using it as further evidence of Microsoft's decline. So it might be easy to dismiss the lumbering giant as a dinosaur headed for extinction. But not so fast. At this year's CES, video game consoles, along with smartphones and tablets, are center stage. And no company's video game console is selling more units in the US than Microsoft's Xbox, which moved 1.37 million units in November alone. The new Kinect accessory for the Xbox sold more than 8 million units in its first 60 days on the market. On the smartphone front Microsoft launched its Windows Phone 7, or WP7, in October and according to the company it has sold more than 1.5 million units in the first six weeks. In addition, the WP7 had more than 5000 apps available in the marketplace and reached that number 3 times faster than Google did with its Android OS. The analyst firm IDC says, "it is precisely the broad launch and sure-footed execution that allows us to predict long-term success for WP7 at this early stage." So obviously Microsoft learned a thing or two from its misstep with Kin. Microsoft's search engine, Bing, is now the power behind Yahoo Search and achieved its highest levels of success to date late in 2010, and the company expects Bing growth to continue. And with what might be Microsoft's biggest bet of all, cloud computing, the company seems to be fairing quite well as evidenced by its recent wins of federal, state, and local government contracts. Sure, Microsoft isn't perfect, and it is no longer the industry behemoth it was a decade ago, but it is still a force with which to be reckoned. It is a company with more than a $200 billion market cap and more than $35 billion in cash on hand. And with all of the momentum of the company's smartphones, game consoles and cloud computing, I think it would be unwise to count Microsoft out of the game quite yet.

You Know It's Real When It Enters the "Trough"

In August, Gartner Group released its annual Hype Cycle on Emerging Technologies. We here at 3Point Communications were awaiting the release of this year's Hype Cycle because we were particularly interested to find out if cloud computing -- which had been at the "Peak of Inflated Expectations" in 2009 -- would begin its descent into what Gartner terms the "Trough of Disillusionment."

You see, the ultimate goal of any emerging technology is to become an accepted technology as quickly as possible, go mainstream, thus lowering the cost of production. It is then that the investment in the new technology can be recouped and profits realized. This doesn't happen until the emerging technology makes the perilous trip through the Trough.

Some emerging technologies enter the Trough of Disillusionment never to be seen again, such as broadband over power lines, while others, such as interactive TV and speech recognition, are well on they way to mainstream adoption.

It is our belief that cloud computing will quickly become standard operating procedure for businesses and consumers alike, and this was confirmed by Gartner's recent report which has cloud computing going mainstream within 2-5 years. So seeing cloud computing entering the Trough was a welcome sight.

Here are five reasons we think cloud computing is here to stay:

1. It's already here. If you've used a photo-sharing site such as Shutterfly or accessed email on a friend's PC, then you've already tapped into the power of cloud computing. These simple applications, and countless others like them, don't exist on your PC, laptop or mobile device, they "live" in the cloud and are accessed on an as-needed basis. On the business front everything from email to CRM to customer support has migrated to the cloud. Not every company has moved every application from internal IT systems to the cloud, but the trend is well underway and in our opinion inevitable.
2. Cloud computing saves money. When businesses move infrastructure, platforms and software applications to the cloud, they save money. If your core business is not IT, why invest resources, time and money in owning and managing an infrastructure? A good example is Recovery.gov, the first government-wide system moved to the cloud, which expects to save $700,000 in its first budget cycle with more savings to follow.
3. Cloud computing is more secure than people realize. The number one concern among CIO and IT professionals is security when moving a company's data and resources to the cloud. But in many cases, cloud-based security is more secure than a company's internal systems. For example, an Aberdeen Group report found that a company's email security may improve by as much as 53% when moved to the cloud.
4. Going mobile. With the success of Apple's iPad, new tablets hitting the market, smartphones and other mobile devices, businesses and consumers are both accessing information on the go. These devices simply don't have the storage capacity or internal power to house thousands of apps. Rather, mobile devices are portals into the world of cloud computing. And IDC predicts that more than a quarter of a billion smartphones will be sold this year and numbers will increase next year by 10% or more. All will access the cloud.
5. Money talks. Amazon, Google, Microsoft, HP, IBM, Cisco, CA, Oracle and thousands of other companies big and small, are investing billions of dollars in cloud computing. Some, like Microsoft, have made bold claims that cloud computing must be the future of the company if it is to survive and thrive. With this much momentum behind the cloud, it is only a matter of time before it becomes mainstream.

We would interested in your thoughts on cloud computing. Are you there yet? Have you begun the journey? Or is something holding you back?

For the record, 3Point Communications embraces cloud computing and uses cloud-based applications to manage and run our business.

Connecting the Dots

I'm surprised it took so long for the mainstream media to connect the dots on recent acquisition activity here in Silicon Valley. For those of us steeped in both cloud computing and mobile telecommunications, the pattern has been clear for a long time. Nonetheless, I found it encouraging that the Valley's newspaper of record, the San Jose Mercury News, finally reported on the trend in a front page story today.

If you haven't been following the M&A action here in tech's heartland, let me do a quick recap.

• HP just today acquired 3Par for $2.4B after a fierce bidding war with Dell. 3Par's products combine virtualization software and hardware to increase storage capacity and lower operating costs, making them ideal for cloud computing applications. Also this year, HP acquired 3Com, Palm and Fortify Software.
• Intel acquired McAfee on August 19 and then 10 days later acquired Infineon. McAfee makes security software which is a critical element for both cloud computing and mobile telecom. Infineon makes wireless chip sets for three primary markets, security, communications and energy efficiency.
• Google has made a number of smaller acquisitions this year including Aardvark, a social media search engine for $50M, AdMob, a mobile advertising platform that's particularly popular with iPhone app developers, ITA Software, a flight information software company, and just last month, Slide, a social application company.
• In addition, Cisco Systems acquired Tandberg for $3.3B and Oracle acquired Sun Microsystems for $7.4B

The recent Silicon Valley acquisition frenzy, which has already seen five billion-dollar plus acquisitions this year, illustrates two irreversable trends in technology -- cloud computing and mobile telecommunications.

According to the IEEE, by 2014 smartphones and other mobile devices, such as Apple's iPad, will send and receive more data each month than they did in all of 2009. More than 75% of that information will come from Internet traffic and nearly all of the balance will come from audio and video streaming.

A big part of the increase in mobile data will come from cloud computing applications. Utility software (such as maps) will lead the way, followed closely by productivity tools (especially for sales, data sharing and collaboration), then social networking and search.

A senior analyst at ABI Research, a telecom analyst firm in Oyster Bay, NY, predicts that the number of people subscribing to mobile cloud computing applications will rise from 71 million today to more than a billion by 2014.

Asia will lead the way with the largest number of mobile cloud computing app subscribers, but North America will bring in nearly as much revenue because high-paying enterprises will have a larger slice of the pie here.

So it's no wonder that Silicon Valley tech companies are scrambling to acquire companies and technology that will give them an edge in either cloud computing or mobile telecommunications, or both. And if the month of August was any indication, there will likely be several more billion-dollar acquisitions before the end of 2010.

iPhone sold out before it goes on sale?

The iPhone 4 goes on sale in France next week and they are already predicting that it will be sold out. In fact, SFR, the number two moblile network operator in France, stopped taking advance orders for fear of not being able to fulfill all of the customer requests. Qu'est ce que c'est? Last week, I blogged about a study showing the widespread adoption of smartphones in France. Given the latest prediction of the iPhone 4 rush, it might be time for another survey. The question I have is if the iPhone 4 sells out will that be a blessing for Android phones? HTC, Motorola, Samsung, SonyEriccson all have multiple Android models on the market. Additionally, most of the iPhone 4 reviews that I've read mention Android as already having the functionality to have more that one application running at a time -- something new to the iPhone and a subtle plug for Android. The other question I have is is Microsoft too late to the smarthphone game? Steve Ballmer says to expect phones with Windows Phone 7 in time for Christmas but will there be in anybody left in France that doesn't already have a smartphone? Yes, there is the upgrade market but are users going to change OS unless they've had a bad experience with their current smartphone? Should be an interesting finish to the year.

We Built It and They Came

Silicon Valley

My esteemed colleague Jim wrote on this blog just a couple of days ago that he is tired of hearing about how Bay Area is the end-all, be-all of technology innovation and that for his money Boston is every bit as tech savvy as the nerds in Silicon Valley.

Ironically, that very day, Apple – a Silicon Valley based company – surpassed Microsoft as the most valuable technology in the world! That’s right, a company from Cupertino, CA #1 in the tech industry.

But as strong as Apple has become over the past few years, it is far from being the only formidable technology company here in Silicon Valley. You may have heard of some of them -- Google, Facebook, eBay and Intel. And literally tens of thousands of other companies too. But we’re not just about the Internet and semiconductors any more. No siree!

Just this past week President Obama was in Fremont, another Silicon Valley city, touring Solyndra, a maker of solar panels, where he touted the new factory as an example his administration's efforts to encourage job growth in innovative technologies. Green tech comes to Silicon Valley.

And Solyndra is not alone. There are dozens of new companies developing green technologies here in Silicon Valley, and a number entrenched semiconductor companies, such as Intel and National Semiconductor, are spending big amounts of R&D money on new photovoltaic and solar projects.

Biotech is another area of growth for Silicon Valley. In fact, hundreds of Valley-based biotech firms are expected to vie for $1 billion in new federal tax credits and grants aimed at boosting medical research and generating jobs.

Boston is certainly a vibrant and important market for a number of diverse technologies. But Silicon Valley, like Apple, isn’t going to give up its #1 tech ranking easily. That’s why 3Point Communications is located in both Boston and the Bay Area. We know that if you’re going to provide world-class communications counsel to technology companies, you have to be in both places at once.

Will the Cloud Save Journalism?

Do you ever struggle with defining the line between content and news?

I could justify the blurring border easily if I look only through my commercial lenses. But that seems self defeating, because the question ultimately brings into play the foundation of democracy:  What happens to the press' role as the Fourth Estate when the news media experiences the kind of rapid decline we've witnessed over the past decade?  

The emerging void in journalism should worry all of us. The Project for Excellence in Journalism's recent annual "State of the News Media 2010" report, indicated 5,900 newspaper jobs were lost in 2009 (in addition to a similar number in 2008). The overall impact is a 33% reduction in newsroom employment at newspapers since 2001.  In the same time, there have been 450 jobs lost at local TV news operations.  We've seen major dailies shutter their doors and major news magazines like Newseek placed on the auction block.  We've seen this offset with an incredible number of bloggers -- only a handful of whom are legitimate journalists.  But can a disaggregated array of bloggers -- many of whom represent corporate interests rather than independent, objective journalists -- serve as the new Fourth State?  And if not, what is THEIR role? 

Not surprisingly to regular readers of this blog, we believe the cloud will serve a valuable function in rebuilding the Fourth Estate, enabling the high costs of printing, publishing and physical distribution to be contained while restructuring advertising models. We see an interesting new vision that integrates journalism and neojournalism in projects like Newsflash from Future News: What Will Journalism Look Like?, published last year by the design experts at IDEO.  We see exciting possibilities for media in new technologies like HP's MagCloud, and we see user friendly delivery systems emerging with the new generation of eReaders like Apple's iPad and Amazon's Kindle. Technologies and ideas like these involve audiences, diversify content, expand ideas, accelerate the creation and delivery of information into a continuous two-way stream and provide us with relatively familiar formats for accessing information with the touch of an icon regardless of where we are in the world.  

But journalism doesn't exist without journalists. The question that worries us most is whether news media can shed the crushing costs of traditional brick and mortar publishing overhead and embrace these new models fast enough to begin reinvesting in their depleted editorial staffs?  


Image reprinted from Newsflash from Future News: What Will Journalism Look Like? © 2009, IDEO 

We Love Apple

I am not an Apple customer.

Well, that’s not entirely true. I do own 3 iPods. But for a variety of reasons I own a Motorola Droid smartphone and have used PCs since my days at IBM. I have nothing against Apple products per se, in fact, when I’ve encountered them I have found them easy to use and of the highest quality.

While I may not be an Apple customer, I do like the company. My kids attended school in Cupertino, where Apple is based, and benefited from the company’s tax dollars and generous gifts to local schools. And who can argue with the stock performance during the past few years!

So I am sympathetic when Apple finds itself being attacked. In the past two days, Apple has found itself being attacked on several on several fronts at once.

A few weeks ago I posted to this blog about the young Apple engineer who lost his prototype 4G iPhone in a bar in Redwood City. Believe it or not, it looks like it’s happened again.

On Wednesday, a Vietnamese web site posted pictures and a video of a prototype 4G iPhone, complete with Apple logo and 16 Gigabytes of storage written on it. The video shows the inside of the phone that includes the new A4 processor from Apple. The company has not yet responded to the incident, but it’s clear another prototype has been lost.

Back on this side of the Pacific, Apple wasn’t talking about its most recent lawsuit either. On Wednesday, Taiwanese cell phone maker HTC filled suit against Apple for the violation of five key technology patents. While the lawsuit wouldn’t block the sale of Apple’s iPhone, if the ITC rules in HTC’s favor, Apple might be required to pay millions in fines and licensing fees.

And if that weren’t enough, Adobe, Inc., maker of Flash, took out a full page ad in Thursday’s edition of the major newspapers including The Wall St. Journal and the San Jose Mercury News criticizing Apple for blocking application developers from using Flash for apps that run on Apple’s iPhone and iPad product lines. Part of the copy reads, “What we don’t love is anybody taking away your freedom to choose what you create, how you create it, and what you experience on the web.”

Ouch.

Yes, it’s been tough couple of days for Apple. But with more than a million iPads already sold, 7.8 million expected to be sold by the end of the year, and more than double that number sold next year, Apple will probably do just fine.

Even if they don’t have me as a customer. Yet.

Tablet Wars

Early in my career I had the good fortune to work with Dick Hackborn while he was still running the LaserJet printer business for Hewlett-Packard. Hackborn was a very smart guy, and one of the business and marketing strategies he most often employed was “never attack a fortified hill.”

What he meant was that it’s rarely a good idea to enter a market that has many competitors, with mature product lines and lots of loyal customers.

I thought of Hackborn’s fortified hill this week when I read that Apple had sold more than 1 million iPads in the first month they were on the market. That’s a lot of tablets. And Apple’s users are among the most loyal in any industry. So you think that competitors would think twice about entering the tablet market. Wrong.

Instead, competitors are entering the market as fast as they can.

Already in the market with Apple is the WeTab from German-based Neofonie, Fusion Garage’s JooJoo, and France-based Archos 9. Other expected entrants into the tablet market are Toshiba, Dell and other PC manufacturers. HP has already given sneak peaks at its Slate, which is Flash enabled (unlike the Apple iPad) and runs Microsoft’s Windows 7. Google also is rumored to be working on a tablet.

Google, Microsoft and the Palm OS (recently acquired by HP) will all vie for the operating system of choice on the new tablets.

But the question remains, what will it take to avoid getting slaughtered as these companies attack Apple’s fortified hill.

The key to success will most likely lie in their ability to create easy to use APIs designed to attract as many application developers possible. Apple has an unbelievable head start with more than 140,000 apps. Most industry analysts are betting that HP will have the best shot at battling Apple for tablet supremacy, while others are leaning toward Google.

Here at 3Point, we provide our clients with business and marketing strategy, so when we view the “tablet wars” through our marketing lens, it’s hard to bet against Apple. After all, they beat all odds when they attacked the fortified hill of MP3 players with their iPod, and won with an all-out marketing campaign. I’m betting they’ll be just as fierce protecting their iPad fortified hill.

Apple v. Google: Battle in the Cloud

I watched with amazement, and some amusement, as more than 300,000 people bought the new Apple iPad on the first day it was available -- and it isn’t even 3G enabled! I find it fascinating to watch people rush to buy the latest and greatest tech gadget the day it comes out knowing full well that it will have glitches and bugs, and will fall far short of versions 2.0 and 3.0 in terms of performance.

I talked with a geeky engineer friend of mine last night who had purchased his iPad last weekend and he gave it a less than glowing review of “it’s OK.” “Wait’ll the next rev,” he suggested.

But who am I to talk. I did the same thing last November when the Motorola Droid, running the Google Android OS on the Verizon network was introduced. I actually contacted Verizon in advance of the Droid launch to place my order. That ensured that my Droid arrived in the mail the first day the new smartphone was available. And guess what? It did have glitches and bugs, and it did fall short of my very high expectations.

Then on December 11 of last year the next rev of the Android OS automatically installed on my Droid and all of the problems I had experienced disappeared. Wait’ll the next rev, I thought to myself.

So I found it a bit ironic that on Tuesday of this week, just 4 days after the launch of the iPad, my Droid once again prompted me to download a new version of the “system software.” Was Google responding to the iPad launch with some vital fixes to the OS, or was it packing new features into it to maintain its lead over the iPhone? I wasn’t sure, but the timing of the operating system upgrade sure was interesting.

It is becoming clear that the future of mobile communications will be a battle in which both Google and Apple will be featured prominently. The iPhone came first, but the Google-driven Droid has proved to be a worthy opponent. And while the iPad hit the market first, there are several similar tablets in the works, including the WePad from Germany-based Neofonie, that will use the Android operating system and access the tens of thousands of apps available in Android Market.

A source no less than Gartner Group is predicting that the Android operating system will surge to 14% of the smartphone market by 2012, putting it ahead of the iPhone, Windows Mobile and the Blackberry; second only to the Symbian OS used in Nokia’s devices which are popular in Europe and many countries outside the US.

And why is Gartner so bullish on the Android OS? The Cloud. Gartner gives Android such an enormous surge in popularity because of a variety of factors, but chiefly because of Google's backing of Android and the range of cloud computing functions and related applications that Google will make available in coming years.

Smartphone applications live in the cloud. Therefore, the smartphone with an operating system designed for cloud computing is likely to perform better, and work more intuitively, than an OS that wasn’t built with the cloud in mind.

To quote Ken Dulaney from that Gartner Group report, “…because Android and Google operate in an integrative and open environment, [they] could easily top ... the singular Apple.”

Yes, Google and Apple will continue to slug it out in both the tablet and smartphone markets. Both companies will make great products and both will market the heck out of them. But the winner may be decided by which of them better understands how to work within a cloud-computing environment. So far, that appears to be Google.

Energizing Brands

The number of brands in the world is increasing rapidly. With that, you would think there would be a renewed effort to think about brand strategy, brand positioning etc. as the key to differentiation and the driver of corporate strategy, since research shows as much 33% of the valuation of public companies is linked to their brand. Just look at the companies with high two of the highest valuations in technology -- Apple and Google -- and think about how good they are at creating, enhancing and expanding their brands. Heck, we are so impressed by these brands that we don't even focus much on their mistakes or failures. We buy into their vision and are left in awe of their inventiveness.

These are, what the authors of a great article entitled "The Trouble with Brands," define as "energized brands." The article was published in Booz Allen's magazine Strategy + Business.

The article is well worth reading as it presents both a strong point of view and rare analytical data regarding brands (the authors developed and use Y&R's Brand Asset Valuator tool). But to summarize it , energized brands are comprised of three major components:

1. Vision. Brands with vision embody a clear direction and point of view on the world. They convey what they’re on this planet to achieve.

2. Invention. Brands that score high in invention change how people feel and the way they behave.

3. Dynamism. Brands with dynamism create excitement in the marketplace through the way they present themselves to consumers. Dynamism is the most emotional and immediately visible of the three components. It reflects the brand’s ability to inspire consumer affinity.

Clearly consumer brands are more the sweet spot for this, but you only need to overlay these three aspects as a lens to see how Apple, Google and a handful of other brands elevate themselves above the thousands of others that compete for our attention, our engagement and our loyalty. It is not just about marketing or communications to manipulate a brand. It is about vision, planning, aligning products with unmet needs in the market and defining the right customer for the product. And it only works when there is passion for excellence balanced by a culture that understands failing at times is part of the process of innovation -- as IDEO, the terrific market leader in engineering and design, likes to say, "fail often to succeed sooner!"